CHRW - Earnings call transcript Q4 2019 | C.H. Robinson Worldwide, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the C.H. Robinson Fourth Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode.

Following today's presentation, Bob Houghton will facilitate a review of previously submitted questions. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, January 29, 2020.

to of conference Investor like Houghton, to now President Vice Relations. would turn over the Bob I

Robert Houghton

Thank you, Executive Donna, call Zechmeister, today and Chief good morning, be our Biesterfeld, everyone. Bob our Officer. Chief Financial Officer; Mike will and On our

provide remarks Bob their our XXXX fourth that be website section of found in at on quarter and commentary our Presentation results. Mike slides Relations chrobinson.com. will can accompany the Investor

release received yesterday. comments their responses the after with our we earnings We will follow pre-submitted to questions

I'd you X may today's to could remind expectations. like forward-looking presentation contain actual management's our that today to remarks our that factors statements. results in Slide from cause differ lists

And that, to will over call Bob. with turn I the

Robert Biesterfeld

good Thanks, morning, everyone. Bob, morning. the and right get to I'll point this

our all market. margins, per if targets. operating our long-term not earnings our our finished trucking in been changes below North revenues, facing rather share We've and American unprecedented, Our some extreme, well net cyclical

near year results per experiencing One a of a revenue double-digit demand. quarter driven year-ago. followed rapid was growth. period we another revenue and stands by contrast company by stark of dollars net and for price reported shipment ago, net The weak the capacity This XXXX fourth declines, revenue were record excess to net resulting total of

including operating in expenses Higher magnified operating quarter, the provide our on expenses prepared for Information increased Technology, in will investments context the this effect. more remarks. Mike

our not clear, expectations be To reflect forward. performance fourth do results quarter going our

freight We even more committed during challenging periods are our cycle. in the investments to technology, in

averages. the fourth to quarter of this below our quarter led investments Our low-end margins historical operating

cycles and align our the cost margin freight to the continued drive over the swings net are We advancements but market, in growth long-term. large we the to operating expansion operating needed revenue not believe will through immune

cost the our on million operating $XXX in three with of will next costs controls focus over target eliminating our years. continue We

our results fourth to do long-term some will important we the move that our margins we operating took Despite expect as improve. quarter. believe So that we below begin really expectations, in through mid-XXXX, steps I

our adjust our to optimize continue in pricing to order We results.

net environment, largely the decline Our cost pricing benefited rapidly last truckload quarterly shipment a truckload decade. in falling XXXX the revenue highest fourth fourth in the from per in per anticipated quarter resulting as contractual shipment quarter as net revenue of in was

NAST truckload On an LTL. contractual fourth during levels absolute truckload, the volume mid-single-digit volumes, experienced volume healthy enable line quarter by growth in measured in per Pricing was reflect to where balanced helped markets basis, XXXX. gains market in freight our very in revenue X.X% deliver quarter much current a X%. shipment flat including net increase XXXX market Freight to Index a in the declined and adjustments as approximately Cass us and in volume These both the are with share

improved trends increasing volume January, truckload further in approximately Our X%.

investments are starting our drive XXX technology including truckload in volume between and in We to see efficiency basis our NAST point operating in spread business, increased growth business. growth favorable headcount a our

$XXX through shareholders operating And our the deliver million and $XXX for full-year, $XXX generated We combination share dividends. flow to cash a generated margins in operating and quarter we in million industry-leading high. returned cash continue the We quarter. fourth an flow of operating the to buybacks all-time of in million,

from quarter the to areas customer increased to have while bids and lines During provide and C.H. LTL to in control, we come of contractual that win truckload we excel our in with our our the quarter, on and teams our innovation excellent that another continue service rates can largest customers increased continued awards Robinson. including expect customers, service

customers capacity customers results to the brings freight to for solutions provide employees supply and expertise the to continue our routing delivered carriers. we our and of chain and for our proud that optimize secure our carriers efforts and to particularly am life I of

we North retail in consolidation announced a services Services, provider Distribution of of acquisition Prime America. leading the Yesterday,

about excited are has that consolidation the are retail warehouse that and strong Robinson. to is the leadership experienced a warehouse the value-added existing of the to the and and in platform. We carriers team bring capabilities Prime we consolidation scale Prime employees, to Prime our customers, retail and C.H. bring will operations thrilled

call now to introductory our those over performance. financial remarks, With I'll turn Mike review the to

Michael Zechmeister

revenues Thanks, decreased our lower excess capacity across services earlier. good to referenced QX due primarily summary. by that quarter total Bob, shows everyone. Slide income X, pricing most X.X% demand continued morning, Bob and transportation statement Fourth in driven the soft gross

of the compression October, line. service in down were Total decreased and November, pronounced in XX.X% same more The company period XX% net in by margin weeks in truckload deterioration revenues monthly when day two commercial both to net activity. per XX% major to XX% leading down the final QX month in down of the December performance last quarter led December in compared driven in middle decline year. the holidays revenues in fell net a our revenue weeks, business was by where in the the

The operating the in down net basis was SG&A increased revenue we to points seen driven declined the last last compared were dollars income drop decline over was X,XXX QX QX had XX.X% year when highest and to Total margin by year. eight expenses. in margins Operating quarters.

related increase savings expense technology to and accelerating were to spend and SG&A initiatives. purchased services The growth the largest our contributors cost increased

per to million the Within ongoing approximately would $XX QX Diluted expense in expect from we were earnings in QX, be expense. year. down not XX.X% was SG&A $X.XX that there share QX, last

a rate one-time approximately fourth basis rate in of the from lower XX.X% Mexico. true-up quarter net improvement included points impacting XXX from The QX Slide driven return last year. effective benefit in to tax was rate X a covers other effective tax primarily The $X.X million by provision highlights an XX.X%, of income. items,

repatriate QX, cash almost was foreign is in The to the tax strategy in of offset earnings entirely consistent to credits. manner. reinvest with increase subsidiaries, income intent economically by our removed assertion in tax change efficient an we expense In and foreign our indefinitely resulting which

other XX%. of Interest Looking year. in cash impact XXXX working interest effective Fourth the quarter be currency balances full-year $XX.X QX of million to to expect other ahead, last conversion in includes we up rate our expense investments $X.X and million, to each tax totaled the related from XX% and in primarily of to where currency functional capital reside. revaluation the and the expense range country those

unfavorable down outstanding primarily in year X.X% from from $XX.X QX. Average repurchases reduction. QX by included this driven included interest million, last revaluation a compared overall QX share expense gain QX to debt to million currency year primarily million impact by $X.X due that a million $X.X declined $X.X currency were in diluted shares revaluation.

Turning and QX million. operations to working declined to offset primarily due Slide to decreased capital earnings capital X. XX.X% QX versus expenditures capital. expenditures Cash improved full-year $XX.X $XX.X by to partially year million, totaled brings flow from which last

be invest We $XX XXXX. are expenditures million to between million expect least at with in with to capital previous $XX dedicated announcement, total million planning full-year spending we primarily XXXX technology Consistent in $XXX to and our technology. spending

of million repurchases In dividends, to QX, we versus an approximately last and decrease represents returned which year. shareholders share through a QX XX.X% $XXX combination

shareholder and authorization to XX million share remaining value. enhance on to repurchase shares nearly have repurchase opportunistically intend current our We shares

year, sheet Fourth the in on to driven net capital the revenues. Slide some decline XX.X% highlights Now balance by working X. quarter on prior decreased versus

was versus end end weighted-average in $XXX rate quarter at balance year QX last and $X.XX of compared the was the billion, interest X.X% in last debt down X.X% QX quarter million approximately our Our to year.

end that expanded mentioned, Prime acquisition Services cash acquisition capabilities excited Prime brings QX the of to acquisition and with Distribution about by plan committed As We financing. the anticipate finance and the close existing and the we're to Robinson. Bob the to

not XXXX, it or EPS to level slightly meaningful have While a on accretive of would share we to expect expect we acquisition this impact be repurchases. the to in direct

volume will look morning wrap net trends comments a January. up in our this with revenue and I my at

January trends company truckload business soft improved levels. total revenues have well over below volume QX combination demand our down year-ago capacity keeping January of are approximately net levels, excess XX%. day the pricing is and per While

approximately up year, highest truckload January X% this would make versus record. However, last for volume volume NAST on which truckload NAST January a is our

company and January total both XXXX, net per revenues in day February X% in XX% March. increased reference, in and increased For business

this listening for morning. Thanks

the to business segment Now additional provide context our on to back turn and the some Bob I'll call over performance.

Robert Biesterfeld

you, current the percentage mile our and carriers, light highlighting decade. Thank by fuel market. mile truckload Mike. our state current over performance to costs cost NAST billed per excluding the I'll rate segment contract the the to begin per on the truckload remarks our operating lines customers of America Slide represent change in X, paid North my dark and On blue

per cost net Price declined During XX% to mile pricing the contract declined contractual our our customers to per versus quarter, levels. of both billed declined while market spot year-ago paid fuel X.X%. mile carriers and

cost committed margin compression of on moderated proposition, price revenue of declined value versus the the in with quarter. accept compression fourth a basis a We do in relationships. XPL margin net variations, the third the The cyclicality, that resulting managing and is marketplace big year-over-year part in rate quarter, particularly our

cost fuel X% annually. the XXXX, Since each net average price of and have approximately increased

broader has with inflationary So than downs, been truckload ups more U.S. pricing and the the all economy.

in and volume resulting fourth a in quarter period. year-ago a shift XX% a approximate mix results in typical price environment, XX%/XX% quarter Our volume the that and an to is contractual contractual mix cost XX% reflect versus a us declining for transactional in of

X.X we management. the routing metrics guide our depth use on just under stated in $X is was we of in consecutive for from quarter, first cases. carrier guide which business, depth of the freight executing fourth routing that shipper's a the in of truckload represents As measure to most shipment routing conditions before, tender the Services was billion one tender the market Average guide representing Managed over average,

lowest tender operate rates high contractual the depth to route continue experienced levels with in this guide the first routing XX% range. decade remains This near guides we've and acceptance

market the reflect to to headed we work into continues pricing near top conditions we're as the current of guide XXXX. route ensure Our

Surface decline in primarily net Turning decreased XX.X% Transportation revenues our in the truckload. driven quarter American Slide XX to Fourth NAST Business. North by

truckload Freight fourth margin outpaced for Index the decreased the Truckload revenues compression. Our the quarter driven by quarter Cass LTL net volumes and year-over-year in XX.X% fourth changes quarter. to consecutive combined in

seen, not, earlier, we've when decline year’s lowest the margins is truckload in margins mentioned in to resulted fourth the truckload past customers pricing quarter we've in to lower the in shipment our the I but net decline were seen highest the compared As decade. quarter. per revenue XX% These however year-over-year last

net facing We first NAST headwinds last versus half anticipate quarter throughout Fourth per year. truckload flat revenue the XXXX. given approximately in the volume XXXX was high comparables historically load of

contractual pace. mid-single-digit truckload fourth increased at Our quarter volume

solid This completed freight bids compared volumes softness was XXXX. Through of market. to and win the our by in performance fourth continued doubled double-digit fourth was contractual the nearly where decline evaluating quarter, market and when transactional in performance a offset the annual volumes our pricing portion quarter the the on truckload spot rates of reflecting

During third truckload quarter this the a which to a this XX% last we the X,XXX decrease to We new to XX% carriers that compared declined the exit our added represents marketplace. clear year's sequentially carriers quarter, a roughly fourth and see sign as continue quarter over of year. network,

increased LTL volumes in in customers. decreased line, LTL net our intermodal net revenues by new growth led quarter. fourth X.X% X.X% decreased In compression. revenues for the quarter the margin service driven by X.X%

compensation offset Slide income our basis for partially the headcount headcount quarter while the by of and by points, X.X% in operating ending driven reduced quarter is operating performance. XX.X% X% full-year. Fourth for NAST margin revenue the X,XXX XX.X% outlines net down NAST decreased decreased variable operating year-over-year the decline, quarter. average XX income expense NAST decreased

revenues our were highlights net Global Fourth quarter down performance. Forwarding XX Global Slide X.X%. Forwarding

Space of Cargo the growth The points net quarter. Group X of acquisition Our fourth revenue contributed percentage in

of of service ocean X and net in lower quarter shipments contributed pricing. and down quarter contributed in X.X% line, volumes revenue in percentage revenue driven decline pricing. growth. by were by were Cargo air a our X down points growth. Space revenues X.X% Ocean fourth XX.X% quarter net the In net driven Space revenues the Cargo lower points XX.X% net percentage decreased

growth in period both tariffs reduced enacted build negatively QX uncertainty included by results quarter industry the due highest first negatively our year-ago were demand of air trade XXXX. to lanes tariff shipments ocean from also XXXX to in impacted of to impacted the volume in China by Fourth that inventory ahead quarter the and were comparisons rates to U.S.

driven point quarter, decrease decreased a revenue pricing quarter. the net transactions. lower in Customs X.X% fourth customs and in revenue Space to contributed net growth primarily Cargo X by the the in X% percentage

margin Operating expenses, Average income by for performance. Global XX lower offset decreased XX.X% points of versus primarily income Slide X.X% SG&A by operating net variable year Forwarding and Fourth lower higher operating which the was our quarter revenues last decreased outlines XX.X%. headcount increased partially basis quarter. XXX driven compensation.

of Forwarding that impact Global and expect technology exceeds deliver Over Cargo, quarter. volume growth for efficiency. our operating Excluding flat in to through the we to expansion time, margin drive our of investments headcount Space headcount growth headcount was a the combination

Moving XX. and to segment our Other on All Slide Corporate

All North as outside Surface other of reminder, includes Services, as corporate expenses. and Transportation a Other As and well Fresh, Robinson miscellaneous America, revenues unallocated Managed

decline quarter in Robinson revenues generated in personnel service restaurant year, did business X% operating declined last lower Fourth and expenses. customers. in service driven quarter. related traffic by XX.X% quarter, Case Fresh were a expansion XXX changes several volumes Robinson at Fresh points basis margin down center the key in due net versus of mix to and primarily food the

increased new customer XXX Services combination operating quarter. Fourth and on additional basis by customers. Services points to quarter net Managed selling existing of revenues a margin the wins services driven X.X% Managed expanded

European Other volume. points added Surface in Transportation increase in an net revenues offset net Europe, revenue in Service The XX% quarter. truckload the percentage by Dema growth compression margin quarter, of acquisition X the partially by of driven about for declined truckload X.X%

On Slide with prepared few go-forward comments expectations. a our to wrap up XX, going our on I'm remarks

expect of opportunities, trend and levels cost resetting to guides American last year-ago transportation market a With that lower truckloads purchase at the continue. spot softness still year, in routing we and is and versus below are prices this continued North freight

to next of revenue year-ago shipment below in basis, fourth shipper net dollars the sequential fears the per pricing remain impact unchanged quarter relatively expect to half demand. Global a sequentially and were recession over tariffs we our through truckload quarters. and pricing relatively continue and costs truckload remain regarding of we flat to continue And levels concerns On to Forwarding, of couple first expect In business, XXXX.

steps our generate We've more share the remarks, As meet our returns reset service are LTL needs current truckload carriers, in our and be horizon. lines. that said taking below am my shareholders for pricing employees, our I we which and while ensure we I that to long-term confident that to driving with our gains market long-term our marketplace over the results competitive our our targets. is strong conditions, With to opening in customers, fourth continue are quarter of said, we

carriers. to We're bookings by leveraging carrier first percentage quarter increased versus drive to truckload technology level our investments to in of our productivity, automated increased order employee the points XXXX. doubled innovation and in of increased customer bring The customers into and orders automated our X

the service We our fully automated are rapidly in increasing largest of bookings occurrence line.

These continuing lowering enterprise expect our and cost to the carriers. services to our With million will same to $XXX do time a we years. while on further we to operations the our leverage serve our expense continued customers and in the network our focus expand and three across provide deliver to the business technology the that investments next operating cost and optimize initiatives reduction to sell, at our benefits over

share And opportunistically on create still with nearly for our shares will outstanding value continue repurchase authorization, repurchase shares to XX million to shareholders. we our

Robinson the an Regardless give annual employees. roughly that million information for of more nearly shipments opportunities and outcomes that companies provides rewarding in having on freight global believe a billion creates the and C.H. that platform XX conduct freight over to better our $XXX career environment, visibility spend, we year advantage our business for executing XXX,XXX

solutions for leveraging deliver We experts and our chain smarter our that's supply customers carriers. built our for to and to remain technology firmly committed by

our our focus market of areas to services, generating of across for gains all also expansion operating serve industry-leading to cost reduce investors, deliver margin including to firmly and investments are time. delivering committed levels leveraging share and technology cost sell the We continuing our to our to over service, while

thank and the Company. want that them success Finally, I our I our team, of very of continued to to their efforts for proud continued be ensure

the our And turn I'll we that, answer it concludes prepared comments. submitted back the operator, questions. That can with so to

Operator

the for yours session. is floor Q&A the Houghton, Mr.

Robert Houghton

Donna. you, Thank

many our would submit thank yesterday. I analysts time taking release earnings for investors to like to First, after questions and the the

question it session, a turn For will I then response. or the over Q&A and Mike to today's for frame Bob up

question Oglenski similar for Morgan a first asked Stanley from Barclays. with question. Ravi comes Bob Our with Brandon Shanker

While and markets? rapid on share potentially doubled and coincidental, C.H. Should material competitive the increased the long-term have revenue occurred both investments timing brokerage strategy. of landscape gaining technology-focused Robinson's as platforms C.H. recent entrants concerned in from declines participants truck by have apparently brokerage Robinson changing new shareholders be down industry

Robert Biesterfeld

Bob. Thanks,

really declines couple experienced load, that in revenue year-over-year we per quarter surprising given in seen in of that dynamics was what fourth past changes in of occurred which the unprecedented years. that really market net isn't the pricing truckload So in we've overall terms the

back, than in we've in which clearly quarter load, And the decade. look quarter levels. this the faster pricing fourth fourth has dynamics and of XXXX, saw of price the the now. and really lot we market in pivot right of this unprecedented dropped we then As market volatility And really saw market in the we starting prices past ever per at then all of in we’re in driven volatility increases the the XXXX profit middle a through seen

comparison. load per results was quarter’s Our fourth this really decade. we've And that highest quarter makes alone at in a in net seen the that look revenue comparison over stark

come competition backdrop, on back that to the of profitability. with the want to as direct So question and I a do impact

and And in truckload easy I on it's at to the absolute net that it this sense we maybe past at down the in the points is in things what case boil back, the denominator. order this peel to fairly the then basis, compared in business, our makes per market conditions really of earn mile revenue look to So of to common that a think similar. to look lowest terms where really

an showed through example, an the average largely balanced. in XXXX that XX The on to considered of about the as So report we to guide Again, metrics the tender. of depth end of routing the XXXX quarters uptick bit. of little the X.X a market started I'd also the up with and XXXX beginning from was exception on QX XXXX at markets when heat call the market relatively balanced of XXXX. attention always

ranged between balanced Routing time again, guides that to at X.X markets. relatively X.X,

If per similar C.H. net it quarters XXXX. earned Robinson conditions, XX that look revenue mile the during in at nearly average per you net earned those is that quarter mile we the of the fourth of market revenue same

different the we very that all have how are is companies to but down it's create the And and similar both XXXX, when in continued evolve, supply many to focus virtually on value So you number and involved shift on C.H. increased lands know XXXX technology. same cents it in Robinson the earned number. was for terms in in it landscape that the XXXX of than and it chains clear in competitive today boil that does really the we of markets, that that

Robert Houghton

XXXX? And to was you Can The level of of question. from the asked related large not? next out of crux Loop or other increase unusual UBS investment? and fourth spend Kauffman miss in please how to related should How a what this question be the the SG&A much Mike, similar technology spend. Vernon SG&A Tom spend Dave Wadewitz from break Bernstein is with Jeff to much items, unusually quarter Capital. with was

Michael Zechmeister

sure. Yes,

of spend technology that million over expect in commitment strategy Of technology versus the investments As you last near-term. approximately in core was to increase is $XX QX to years. billion the one-third to related external to five we continue the our investments that next and our year, of increase SG&A know, $X to

to were purchased those initiatives quality mentioned, of bring I not to related help that million of the cost And the approximately There growth years SG&A and implementation to we initiatives. and quarter will also that speed in ongoing services expect next expense as be we would over expense. $XX accelerating our had also savings the three us

Robert Houghton

truckload Hartford view announced Ben expectations language The next over similar efforts question more the a million Noting W. Bruce your magnitude Baird. question. do of the facing is you cost to for from brokerage Chan incremental asked to time, net operating number Also, reduction relative Stifel Bob the with $XXX initiative for to that Robert at the Or industry as the NAST moment? comes leverage? from management's margin to XXXX an a run deliver of as offset the rate? pressure improvement the

Robert Biesterfeld

of output ongoing $XXX business work shared services So of said, goals this But reduction an achieving and as units each targets the transformation. $XXX and of Mike the enterprise within million around NAST. our the have this has that is the in of million been most target as cost across part

is a through efficiency our For the internal NAST, initiative business cementing early some it both as that new this targets of isn't with workforce driving to trading of the interact partners. our around of much of processes as stage and and really transformation how we greater the digitalization

examples some intend quarter, but portions of bit the saw this come fourth continue we savings XXXX anticipate this a to that will do million year. to impact we and in this do throughout grow you in achieve $XXX to And life of

targets have based upon that the to amend announcement enterprise, long-term previously adjust the our don't or shared been growth this we initiative. For intend of

Robert Houghton

Bob is for JPMorgan. question Ossenbeck it’s with Brian next and The from

margin more to persist As in market of challenging a changed? grow and first Will cycles, it January structurally to compared compression market down in of the freight level share XXXX? the prior become half has in what

Robert Biesterfeld

you know, XXXX, down a about full-year we on and quarter finish growth year-over-year rate. fourth flat the for didn't at as So the was a basis volume of our X.X% truckload

however. the the each course we that the Cass the those to outperformed feel about in broader While Index good did do were we Volume past quarters grow find of expecting challenging over We to so. Freight it year, of we volume fact

XXXX, And rapid the the Structurally, myself that two more. went if costs I due the of routing guides seat throughout think was through managing that increased of I the in our averaging depth the failing change was they changes biggest customers, XXXX markets end to XXXX. put of guide most from that of routing or in preceded tender in really where XXXX shipper

then costs a acceptance were high experienced than XX% with at declining environment they’d they almost routing And operating the rates before. cost where encountered rapidly guides flawlessly lower year

wasn't for of diverge plans it motivations difficult course in from and take really that on their to minimal, the the market really shippers lot share there contractual year of to you the XXXX the initial if given was spot missed a So throughout was bids.

Now that and we're deeper volume award into start the the share. year and contractual a XXXX really annual bid effectively we're volume it's about that from ability take is to our our good receiving a season, And that to testament grow January think growth we customers. the I good feel to initial our levels in

know compression, averages. we've our of are first higher half than historical in revenue above the and of our load the terms margin that comparables per that net year we run got are rate In the current of

it ease through headwind So first had a the we year will year, we but as half anticipate as the the of progresses.

Robert Houghton

next analysts. cost what line is the discuss show savings How context of in? would in be cost several three-year items The the provide please expect of million reduction some initiative? as much $XXX you XXXX? Mike, realized please the this And from will cadence up to to question

Michael Zechmeister

automation. NAST to improving experience, XXXX. $XXX savings to of customer on majority over savings come going $XXX is million projects business. of The after benefit end a realized gaining the on expect variety through benefit efficiency third have and in dedicated cost on targeted growth With million growth, designed by the portion of be resources we reduction realized years, that and We'd of a three cost our The specific XXXX. projects including of next and be enhance efficiency, to focused that the focused will about enterprise

Robert Houghton

can January, next Bob, The in with in question case? to Brandon done seems a in to comes Hoexter this revenue core Bank a it a pricing Barclays. with what XX% America the question. to net relative material revenue? Is And in asked net similar volume from in brokerage per be the significant decline X% reverse of reduction the decline business. Oglenski growth, power Ken indicate day

Robert Biesterfeld

that indicates transportation. capture basis customers per really a I per and sell accurately we to a our mean, purchase what I of really load our in anything we're able day think is really more don't or on net the and relative revenue derivative net revenue marketplace per to the load how pricing net how revenue from we power.

As highly said, and overall cyclical less highly than a in serve only we the the we touched and the we marketplace. of a while For still really have we're fragmented Hire market industry, X% largest

look benchmarks And points index as and related over with similar past look to falls dynamics. see transportation we XX,XXX road, really consistent per power trucks that some million party time. in over at we in the the our a control with pricing is and net and said, XXX,XXX purchase revenue of and across I motor and market, the carriers the no the I landscape over the market the at, on one where things of basis millions If cost brokers a mile we cost our compare addressable literally to of that conditions. shippers look we market has that time on side of consistently

Robert Houghton

for level question of efficiency the headcount? Oppenheimer. investments is Scott technology next XXXX they may from Please NAST Bob with contrast The versus operating expected and impact Schneeberger how XXXX? in And

Robert Biesterfeld

to without The any as at by are XXXX what in similar real the going be levels for we business down really to enterprise adjustments saw technology or up unit. meaningful investments in XXXX

is would to the accelerate. that, of we – expect this launched dollars that increased say since from technology, I I positive one things the think would those begins that investment in I the creation value

as to the on and investment should that continue same maybe dollars year-on-year investment basis, output the beyond. a while XXXX of go So we and through the increase compound

our The we around people As carriers. NAST with re-engineer to our internally transform and life and investments capacity to actual the to our of functionality and productivity will with new the the release really more happening improvements be and both that's additional coupled network to new of that productive. and work add bring footprint for the allow and benefits our technology the workflows network capabilities continue continue to and will these team customers features to

messaging think I the we around past course I meaningful of my headcount think volume anticipate against XXXX. really further of results that still and that couple been of over and years most pretty has decoupling consistent this proof topic over and delivering point the the this is the obvious

Robert Houghton

with The Mike. is next Stephens question Atkins Jack from for

you the sheet net of flows, Given and could aggressive you your XXXX? get forward? shareholder strategy allocation more returns your XX% for going targeted Would strength of look look in with income capital balance cash your to to increase

Michael Zechmeister

to looking our is capital investments investments high or Prime acquisition investments. shareholder a deploy which is The the always that for acquisitions returns. through technology example. value business, great in ways our case That's We're adjusted risk in our with maximize

As on I expect say we a that Prime the to meaningful the debt. not price increase do impact our prepared to have share million which purchase the effectively acquisition net in $XXX remarks, mentioned purchases, will is

for We will in also quarter, XXXX. buybacks to XXX% and continue and XXX% fourth full-year net we to to income shareholders reward the shareholders returned of In through dividends. the

shares shares As we to have the capacity opportunistically our outstanding XX to repurchase indicated value. million we still share on shareholder enhance with to nearly repurchase continue authorization,

Robert Houghton

in significantly Brian competition widespread specific? and It or affect from customer volumes so, Our quarter or is with Ossenbeck and Bob trucking next question it If the and during margins lane for JPMorgan. January? was

Robert Biesterfeld

Okay.

margin So and let's volume. that into two pieces break of

from a to in saw fourth no some full-year, almost quarter to there's be would of our I to the the volume for quarter margins, the volumes and frankly impacts doubt entirely of terms accounts declines in year-over-year XXXX. we the our customer cyclical. XXXX basis in characterize In that to on Relative margins

aggressively were was some below the We felt based this competitors that that look markets of there actual of our business, at market. purchase contractual cost the across those priced existed. in where we it of And the that cases clear overall understanding on transportation

that reason contracts before basis terms we've the we Networks said freight, January shippers, the shift I in customers. our the and X% as In don't for idea seen, a and the are pricing related annually for to it's really most in this across as dynamics networks for change I've fact is this fact far believe of as on carriers in up right. that change quarter well that year-over-year of industry, chasing certainly specifically, reset think volumes so

prices give reflects the distributed to don't to We change freight those annually providers comprehensive the freight that and marketplace. provide those in that and the pricing highest inevitably, reset award market bottom best most believe those the as the have and chasing service, the that that levels is of quality in

Robert Houghton

since The net and you view with on in your reclassified for Fowler discuss margins have next Todd was for XX.X% from the KeyBanc. your normalized The question NAST? quarter the comes lowest is operating segments. Please Bob,

for range over achieving While margins? do normalized as margin to for not view timeframe looking you a this what realistic think about guidance, normalized what is segment and

Robert Biesterfeld

Okay.

our Even towards negative operating a our quarter, in not of freight as they're said, forward. in the low performance periods NAST, impact is, the end though. to the averages. result the do We're in quarter on which clearly cycle, And I fourth end margins, fourth in our technology on case had of So them these reflect certainly benchmarks. committed going technology the expectations investments historical our our lower historical the challenging investments drove in of

We to believe up long-term in growth the purchase these as XXXX. bring us for We investments margins continued savings. to more those and over time move that set and cost the a order services tech investments that are these in through going accelerate operating our in much we and believe into leveraging that year up successful we're

improve. the So expect take We'll we to move it there. operating we going as through from year, are margins

Robert Houghton

Our the is entrants undue please in discuss pressure with the Sachs. next are Bob, pricing new they Goldman Alliger on prices market placing dynamics rollout geographically? question from competitive and Jordan

Robert Biesterfeld

this fragmented a examples clean we really best market my get that Thanks, and on do to of difficult cite. but I'll one, based try this I Again, incredibly serve information to some have answer it's on the the I'll Jordan. on that

about annual example, XX, more XPLs do a this where bid. an competing in times on are visibility shipper, invited annual to in billion when We it's we a for with maybe the bid go As XX, year, to freight participate into go we an bid that an might XX, large $XXX truckload basis. as many get we carriers into the throughout in

strategy these first to pricing and foremost, bids serve the of and customer's We in necessarily of is these not opportunities mind every needs contractual the examine to with the think customer's competition's be. customers approach what and and these the we these take bids one we freight. going characteristics We

served of they understand customer service We We other expectations demand. as as densities markets the their at have. along We look that look serve variables. with the that in they freight the several is seasonality our of the and industries at the out that well

From there our process. data. apply our apply we We

against move industry think pricing. where forecast the our of align customer life to plan well Our these along for the as We over profitability and are they then lanes that customer knowledge terms that we and with of as going the serve markets expected our capacity contracts. the the the and our in of

we through the are play, these of put participants of And to pricing it's in boil the in really a and all the emerging course again of that a – proposal that that to and supply We process from price given down there that's of that and variables customer throughout again in year out chain the changing of submit service front party and each and dynamics. one any go pricing are that and we'd all in again the events, see one each the difficult all them.

a that from to we year $XXX all I to real isn't garner base As and close in be that billion there the disruption just with we see data said, any truckload industry. broad insights even freight correlation and our to can of that every that, drawn pricing

Robert Houghton

discuss the Distribution rationale do Group Is overlap? Services. grow Research please acquisition historical with what Scott in asked about you Bank What question. our with Montreal similar revenue with Fadi Prime Fowler is Mike, expect business asked it Wolfe rate there XXXX? at strategic Chamoun to Distribution? Prime the behind this any and Todd of a for of KeyBanc growth and

Michael Zechmeister

for over consolidations within currently our at a a many business service a network have decade. to service We customers Strategically, related consolidation our been U.S. Thanks. business. across of ability of Robinson warehousing than business more Consolidation important, successful has our value value-added of and is provide the LTL as services. X.X our this million to feet square

Prime by consolidation million X.X adding our network we scale will the of add closing acquisition, square feet Upon warehouses. to

truckload services We within our will as as LTL also well benefit distribution and lane from fulfillment and density business.

be our We model our not based of We're the changing. growth is business clear, business logistics business. To consolidation the potential. non-asset with solid believe Prime also into not as contract entering combination

together. the and move about excited other complimentary are businesses as better each Our to make we forward opportunity we're

Robert Houghton

about Alger any capacity truckload seeing truck any Jordan asked you Sachs Bob, Goldman words, other of capacity. are with changes now? initial there signs In to is tighter markets?

Robert Biesterfeld

part our than we've looking It we a available market all basis. of rate sequentially January, said, both quarters. the carrier the December few January, early month in trended signups, But Related as market markets January. to of in and we've tighter did gone are has second the down progressed. the represent Beyond as late settle we've through seen seen publicly some and a tightness, we watch as half really new data at, which meaningfully we the year-over-year of that

Robert Houghton

are Stephens a while reached and where increase with The Seidl for similar Cowen question. asked comes and point you headcount a in period? can your is next sustainable from XXXX? Atkins Bob Jason a with question expectations Fowler for NAST Company; volumes decline KeyBanc; and Have What with for Jack headcount Todd

Robert Biesterfeld

moving in meaningful add volume rethinking that, that headcount. and that And we business grow a without to feel about additional in we forward. how can re-engineering a made progress We've needing terms way of in of lot our because do operates of NAST business

less layer customers, automated in and in focus widening digitalized processes our gap additional volume and about as and productivity continue driving we headcount it declines Our is carriers the that on between change our employees. headcount change the as is in to for

Robert Houghton

Tom Hartford season. of growth contractual from W. the realistic Suisse rates XXXX? does Allison in any question Is to discuss year-over-year a Bob next Robert during first contract the QX the half with of likelihood for UBS; pricing Baird; of basis and declines Wadewitz magnitude Please similar Landry question. or Ben Our truckload during with for Credit bid flat expectations speak and pressure of growth on XXXXs an with aggregate XXXX, is asked

Robert Biesterfeld

the quarters. past chart to that over the over look and you the few rate past where over you of and at we've years, the past decline see in starts last provided cost do earnings it the tracking inflection in know or several over trend the of investor years you If that past the deck really deck the change couple up

of quarter bottom the wasn't cycle. the So fourth

we be think I must that. certainly to close

a of going behavior the and their differently their experience out. But contractual are market XXXX XXXX. where on to the statement, characteristics general in in Obviously depending customer or very the in in by the to we XXXX set of couple time the the spend will think of was either points terms increases different to of be the that decreases pricing plays market of somewhat in year a freight customer, fully customers the flattish up

Robert Houghton

question for next Brian question. similar Stephens. is a Jack asked Atkins from JPMorgan Mike Ossenbeck The with with

quarter as for the personnel versus in XXXX? what that decreased a compensation declines expectation degree fourth expenses expense and what due quarter your the lower XXXX incentive were in accruals indicated incentive You compensation to tailwind compensation. in incentive is To in

Michael Zechmeister

personnel to in $XX commissions reduction incentive the Reduced million expense to equity drove compensation QX. Yes. from year-over-year bonus in

year-to-date compensation, estimated expense. For we of a quarter, do incentive true-up each incentive our

reduction XXXX. performance Given for incentive the in was expense the performance QX greater decline the in QX in arrive expense to full-year needed at the a compensation much to proper in

Given reduction XXXX the our rate. personnel using run QX indicator our is than the annual simply incentive of a extent for compensation expense annual expense in for personnel of XXXX that better QX, expectations

Robert Houghton

with strategy Scott is new smaller for from winning Robinson question for Bob comes shipping Schneeberger with next Oppenheimer. business customers? The What C.H.

Robert Biesterfeld

and shippers our focus. of small a are So huge businesses part infrequent

majority make up, they customer count. of So our a really

half think up our revenue. top I obviously customers XXX before, of make about we've said but it our

this we've Our and got of up of majority small top long XX%, up X,XXX tail the customers that make businesses but make count. customer about our shippers infrequent

of and one we the really businesses acquisition initially relaunched to product year that's then in serve last XXXX the Robinson the why Freightquote these new small made directly. Freightquote So earlier by C.H. reasons

multiple that trying was of businesses, with – lot really and that a customers, what small a and want of a building platform modes that of time and click what understand for the on we a is in of work of we found allows spent and field they button a core to many a at we swipe transportation And to the needed. what really As really process, intuitive need was launching with them they simple card. a credit these of move super with what

C.H. Freightquote by we so And in the Robinson them that platform. delivered to

small, their to global What needs. we businesses team or so other companies, fairly consulting businesses complex built is management services were though needs their an even serve that got services, also we've more maybe with more though, learned, support, these small needed account for they comprehensive complex,

they small – other more maybe advanced was businesses, highly we in functional TMS heard management they what that they and own relationships, system. low-cost what For bit needed their a were a carrier yet

cases, those able we've got product that implement to we're in So viewed TMS businesses. freight for our those

to businesses to needs and these tailored for small how single with and where But the interact small data for businesses while want think just them technology can that a line, a in So of going our leverage we our to are our deliver how us and customers, they our is versus with about to the and solutions advantage, forcing serve platform. them meet larger expertise creative keep a we innovative really I talking I that option we ways. like really here punch

Robert Houghton

see the from next discuss any Please organization? What playing KeyBanc. Incubator impact? is role you What this Todd do is Labs. question Robinson your The financial Fowler for with Bob in if

Robert Biesterfeld

another creating So with ways. is our first and is Robinson customers our increased Labs investment in off, of technology where really example value intersecting new

this the we've we're about we output a in week, and team. for of couple launched years of excited here last the been this really stage While formally building

Robinson’s the carriers. for incubator, in chain Labs, where drive and is and supply next idea and big scaled logistics an tested Robinson smarter essence created, solutions customers innovation in its is are to

Robinson logistics than once more and customers take as innovation talked with our From connected data solutions developers to network our scientists our shippers' the technology with scale able Robinson and solutions hand-in-hand benefits about Labs, carriers in challenges. our enterprise thousand experts, we've work really are scientists team is platform Robinson collaborate our which consists, with them teams, to our there and and Through create customers entire proven all personalized of a for which carriers. across all and and those able Navisphere, Labs the data and to team, engineers

it enterprise originated our many customers directly scaled focus a In terms ultimately have our in us And will projects us of today, the stages me I've shared financial on our that customers engaged differentiator continue the as customers already been that we sandbox. to Robinson can have innovation. of earning in early help market, across and with that customer-led they Labs these with and lead to of the in they've we're be Robinson Several for impact, to but from certainty, lot more part I say enterprise Labs of find its that the systems. with that have been a business since this founding of experience

Robert Houghton

quarter initiatives? quarter how from The operations we Mike and about in any for incur for line the The in from support decline segment Fowler to KeyBanc. should a in accelerated XXXX? All is technology greater into the the Todd Other to unusual year. the with it loss costs in think Are there question and next and income Is that Corporate going

Michael Zechmeister

commercial Results as Other All QX income in IT with expense software, to for question, our segment in the as performance improve projects Todd. Thanks associated additional operations increased HR, from accounting headcount. included the The well loss $X.X off-the-shelf driven by was which sales from and of million Corporate and

it business expense of the segment commercial with our the in segments of overall line off-the-shelf that more or loss. in Corporate full-year in XXXX, Other offset this – caused a expense and carrying In an in profitability All the businesses first segment than there QX item, the installation and and that practice the of associated have software We the year. in

from again year. positive these operations XXXX, software result, to Results All to income as be expenses XXXX and the be in in the out Corporate a segment businesses. expect Other allocated And we will In for the

Robert Houghton

was from JPMorgan. for comes flat Brian Our declined in Ossenbeck Bob while Headcount with volume truckload NAST. next question

head investment? sequentially. you future? and you provide productivity are KPIs However, the if revenue the still return in improving Will of significant levels will generating expected transparency How the to per evaluate more on additional investment net declined share

Robert Biesterfeld

Thanks, Brian.

net to per from by the revenue million. So head almost in decline truckload. over That sequential decline impacted sequential revenue I'd attribute to sequential QX the $XX compression entirely per revenue negatively sequential net in margin QX

meaningful. it’s So

and to Many the tracking business evaluate productivity of of particular volume ultimately against internally will or today several drive activity-based impact metrics metrics and these around and steps and of have we which the to are processes, return. tied productivity And parts that network. automation gains investment the we're across

here I and lower grain relationship that we're I good over headcount back ladder The of as the to identified really many of savings investment. this go measure. return and on a up earlier that the the volume that measures total also of I $XXX achievement that the at, think all looking marker a between progress the other we at Again, for we say that cost part million target talked about is is a

of we is, as do progresses, to your to transformation. it intend and year on, Share The be KPIs few the more that peel transparent? intend that answer yes. back a to KPIs? So question related And more show we more do to to

Robert Houghton

Jason the Mike and comes Any Cowen Company. for other Our with opportunistic on next acquisitions question from horizon? Seidl

Michael Zechmeister

Thanks Jason.

horizon, enhance us services, disciplined question technology fit a platform. your see to our prefer geographic proven will we or a maintain with creation expand fit. M&A acquisitions strong We Specific presence, scale non-asset-based opportunistic build we continue on been cultural As as solid our to of to history, pipeline and on has good remain value business compelling we our strategic businesses strategic and benefits, help models. and a the lever add improve around and opportunities

Robert Houghton

ELD any comes the change Brian JPMorgan. alcohol the you online capacity capacity coming Ossenbeck Our regulatory for drug final Has next any, mandate? impact, of has with with phase XXXX? in What on Bob in assuming appreciable environment trucking and and if from question the are database the there been in

Robert Biesterfeld

directly the phase alcohol and mandate. drug could clearinghouse to the of any tie we final that to coming impacts We've or capacity ELD online seen not the yet meaningful

to other regulations. variables tied the forecasting directly of demand, supply and the XXXX in all Given impacting we're balance meaningful in a capacity not our change

Robert Houghton

the Our final than is while starting Cowen entrance, the that be aggressive. from new still to too? we've Company. are Are this question less Seidl more seeing heard aggressive and with Jason legacy brokers you Bob,

Robert Biesterfeld

would to pricing going fourth and we Anything comment I'd our secondhand so companies reinforce when year. their about of necessarily I bids fourth on quarter other about win to the I'm last here be truckload that strategies. our would not what share doubled information, contract compared hear rates quarter, for

see positive really that as we sign. So a

successful on our our for team business. creating helping they're providing They're focused, while providing hyper services running technology, and is motor careers I carriers staying and focused profitable building focused more people, customers, our focused on value When to on for businesses, unmatched our where long-term great shareholders. our reflect run ultimately on our great

Robert Houghton

will be of replay Investor A earnings concludes the the call. XX:XX today's a.m. approximately call at Time Eastern in our website That portion of today's Relations available at Q&A of today. section chrobinson.com

additional phone conference good for If I participating you quarter call. again day. questions, have via XXXX Thank be you reached fourth can e-mail. Have in a our or

Operator

your for Ladies thank participation. gentlemen, and you

a disconnect wonderful and may You lines at your this time, have day.

C.H. Robinson Worldwide (CHRW) 29 Jan 202019 Q4 Earnings call transcript